For the past six months now I have been fortunate enough to spend my time working for the industry-leading cannabis market data firm, BDS Analytics. Through my work as the Northwest Regional Director, I speak to dispensaries all over the state (and all over the country) on a daily basis. This front row seat has afforded me the opportunity to see in real time, the first real glimpse at the emergence of cannabis market segments. While there are many new segments entering the market… seniors, the creative class and so on, there is one demographic that still accounts for a large segment of the sales to date. I have dubbed these consumers, “High, Low & Go.” They want the highest THC for the lowest price, they want only a few grams at a time and they come back often.

The “High, Low & Go” consumer uses the dispensary more as a convenient store than anything else (think 7-Eleven.) They don’t tend to care about strain names, but rather just THC percentages. They have usually been buying cannabis for a longer period of time and most are not brand loyal. It goes without saying that these consumers are price driven – very price driven. And while we don’t have the official data on this segment, it is safe to say that they account for at least half of all flower sales. (Anecdotal evidence shows this demographic also has a soft spot for pre-rolls.)

The problem with the dispensaries who serve this consumer segment is that when they compete mostly on price, they become increasingly vulnerable to competitors. i.e. What works for them now may not work for them down the road. Yes, location matters but to these customers price and THC percentage matter more. The other issue is that the margins on flower are quite low. Serving these consumers is only profitable if volume remains high.

Often I talk to dispensary owners and they divulge to me, “if I could only get five dollars more out of every customer, if I could only get ten dollars more… it would improve my margins dramatically.” In Oregon we are still limited to flower only sales, but it is only a matter of time until dispensaries can use common marketing tools like bundling and up-selling in this category. Pushing “High, Low & Go” customers to also buy higher margin items like candies or concentrates will prove to be a valuable strategy for dispensaries across the state. Bundling with pre-rolls and flower might also be successful.

Over time we are likely to see more consumer segments arise, but until then “High, Low & Go” is still clearly the dominating segment in the market.

One Response to “High, Low & Go”: The Emergence of Cannabis Consumer Segments

Interesting short analysis of this segment, Claire!
Yes, as you referred to in the article, it would ideal if there was more concrete data about consumer purchase patterns and preferences. Also, your reference in the article to dispensary owners needing to sell more value added products and the eventual emergence of product “bundling” is very insightful!

Ultimately, it will be very worthwhile to be ahead of the curve as the dispensary retailers themselves become more segment specific. This point was raised by a local dispensary owner here in Canada. In particular, for example, there is an emerging retail opportunity for more “clinical retail atmospheres” to serve consumer segments that prioritize characteristics other than “high thc levels and a low price” when making a purchase decision. By “clinical atmospheres” I am referring to retailers adopting a more traditional local drug store environment. Similarly, at this stage of the industry growth cycle it also seems as though the more information about the product variations the better.

Eventually, I am sure we will continue to see see further segment specific value added retailers and value added product variations being focused upon. As you have alluded to in your article, addressing the specific consumer segment needs will also eventually contribute to the marketing’s holy grail, brand loyalty!

Daryl:
Nice Blog Claire, the industry is already massive and still in it's in...

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